It’s impossible to say why without digging into the financial statements. Cash-flowing 68K and asking 50K… it could mean that the place is deep in debt and the buyer will have to assume it. Perhaps the equipment is in serious disrepair and will take a large investment to keep things going.Ive seen pizza shops listed for 50K when the cash flow was 68K, and Ive seen shops listed for 240K with a cash flow of 110k.
You’ll also only see cash flow multiples of 2-3 in a place under solid management where the owner is an “overseer” only. Maybe the owner has to be there 14 hours per day, 7 days per week to achieve that 68K of cash flow. That would certainly drop the value of the business to me. With 68K in cash flow, you couldn’t afford to hire a GM and still take enough out to support yourself. That’s the old “buying a job” right there. The place wouldn’t even be worth 50K to me if that were the case.
It could also be possible that the lease is about to expire.
I might be more conservative than most with this, but I probably wouldn’t touch a business that I couldn’t guarantee 10 years more on the lease. The seller would have to have at least that much left, or the Landlord would have to provide a new lease or new options as a term of the purchase.
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